Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/120855
Authors: 
Tarassow, Artur
Year of Publication: 
2015
Series/Report no.: 
DEP (Socioeconomics) Discussion Papers, Macroeconomics and Finance Series 5/2014R
Abstract: 
This article tests the hypothesis that financial supply-side shifts help to explain the low-investment climate of private firms in Germany. The core contention is that a firm's financial position contributes to its access to external finance on credit markets. Special emphasis is put on small and medium-sized firms as these are assumed to face more restrictive access to external sources of funds. The application of a non-linear panel threshold model allows us to group firms endogenously according to their financial position. As potential threshold variables nine different balance sheet indicators are used. The results reveal a positive relationship between cash flows and fixed capital accumulation. Additional nonlinearity suggests that financially fragile firms rely more heavily on retained earnings. In contrast to frequent assumptions, firm size does not seem to be a relevant grouping variable in general with the only exception being micro firms for which the probability to fall into a financially constrained regime is higher compared to other companies.
Subjects: 
Firm investment
Balance sheet
Financial frictions
Credit rationing
SME
Non-linear panel
JEL: 
A10
C23
D24
E22
E30
G31
Document Type: 
Working Paper

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